Study On The Credit Risk Management Of Rural Commercial Banks In China

The rural ifnance is the core of the rural economy and is the main pushing force of thedevelopment of rural economy. Since the reform of market-oriented economy，our nationhas always emphasized the development of the rural economy. In August2007in acollective learning meeting, Hujiaotao put forward that the reform of the rural ifnanceshould be regarded as the focus of all the ifnancial works, the rural ifnancial service systemshould be completed and the functions of all kinds of ifnancial institutions should be madefull use of. With the ifnancial reforms developing gradually, those four state-ownedcommercial banks—CCB，ABC，ICBC，BOC which play a role in the rural market shouldbe withdrawn back to the cities so that those ifnancial institutions such as the ruralcommercial banks and rural credit cooperatives will be the main force in rural ifnance andbecome the main force to push the construction of rural economy.In recently years, the rural credit cooperatives have been restructured into the ruralcommercial banks by means of stockholding system reforms and the rural commercialbanks have developed in scales. But the development of the rural commercial banks is notquite well for some historic and economic environment reasons. Credit business is the mostprinciple business in banks and the credit risk becomes the leading risk all the commercialbanks face because it threatens the safety of banks funds directly. But because the ruralcommercial banks in our country stay in a relatively unstable rural economic environmentand their businesses involve the agriculture, they are facing relatively higher credit risk，low quality credits and relatively higher rate of non-performing loans. Due to theparticularity of the rural commercial banks, scholars in our nation have ignored its studyfor a long time and instead have put emphasis on the state-owned commercial banks.Therefore，the study on the management of the rural commercial banks’s credit risk canhelp the rural commercial banks improve the quality of credit assets and can play asigniifcant role in promoting the development of the rural commercial banks and the ruraleconomy.This paper takes Hefei Science and Technology Rural Commercial Bank as anexample to study the management of the rural commercial banks’s credit risk in China.Through the analysis of the actual conditions of the non-performing loans in ruralcommercial banks, this paper will study the main reasons for credit risk from threeaspects:the interior of the rural commercial banks, loaner enetrprises and externalenvironments. In the aspect of the interior of the rural commercial banks, the problems leftby the restructure of the rural commercial banks, the unsound credit management systems,the lagging credit management methods and the loss of high-quality personnel are thereasons. About the loaner enterprises, some loaner enetrprises such as townshipenetrprises and peasant households are heavily inlfuenced by the natural disasters andeconomic fluctuation and some small medium enetrprises have low risk resistance capacityand often distort the ifnancial information. External environments factors such asadministrative intervention，social and economic factors，the loss of social trustworthiness system and the incomplete legal system also lead to that problem. Then, through theempirical analysis of Hefei Science and Technology Rural Commercial Bank, the creditrisk will be analyzed deeply from the aspects of loan structures and load risk and themanagement methods of the credit risk and its current situation will also be studied in thispaper. Combined with the current situation of Hefei Science and Technology RuralCommercial Bank, problems existing in the management of our rural commercial banks’scredit risk have been found. These problems include the incomplete controlling system ofthe interior credit management, poor implementation of the three-check-ups credit system,the lagging credit risk management, the loss of sense of risk and high-quality creditmanagement troop and risk management independence, unreasonable credit assetsstructure, high concentration risk and the incomplete evaluation system of ifnancialanalysis. At last, combined with the actual conditions of rural commercial banks, mysuggestions and advice will be put forward according to these problems. The suggestionsare as followed: strengthening the interior control of credit management, improving creditrisk supervision system, building effective system of credit risk identiifcation andassessment, strengthening credit assets management, optimizing loan structure, dispersingconcentration risk，training professionally managerial personnel and strengthening creditculture construction.Due to the limitation in obtaining and publishing statistics and the limitation in mytheories and practices, my study on the credit risk management in rural commercial banksis not deep enough, some suggestions that I put forward are not perfect and their practicesneed further studies.